You really CAN turn just £6 a day into £1million. You may not believe me, but follow these simple expert-approved steps and you will be far better off than you could have ever imagined

You can believe it or not, but ­regular saving into a pension from an early age can make you richer in retirement than you ever dreamed possible. Perseverance, generous free top-ups and the magic of compounding really can build you a ­million-pound pension.

Even if you fall short of that ambition, you can still end up with a very comfortable sum to see you through retirement by following our tips.

The key thing to keep in mind is that you get big incentives for saving into a pension that are unlikely to be handed to you from any other sources during your life.

The money you put in any pension is topped up by the Government with pension tax relief, and you get extra free cash from your employer as well if it’s a work pension.

For example, pensions savers get an uplift to money they pay in to take them back to the position before tax, turning every £80 into £100 if you are a basic rate taxpayer.

Higher rate taxpayers only need to put in £60, while additional rate taxpayers pay in just £55 to get to £100. There is a generous annual ceiling on how much you can pay into your pension and get tax relief – the equivalent of your annual salary, including all contributions and the relief, up to a maximum of £60,000.

You can go back and fill up the previous three years too if you suddenly come into some money, for example from an inheritance. Meanwhile, many employers will match your own pension contributions, and put in extra if you do.

Here, we explain what it costs and how long it takes to build a million-pound pension.

How saving £6 a day can get you to £1m

Your £6 a day personal contribution is only the starting point. Next comes your employer’s contribution.

The good news is that more than half of UK employers will match your own contributions, and in some cases go even further to attract and retain their staff, rather than just put in the compulsory auto enrolment minimum.

As a bare minimum, your employer should put in 3 per cent if you put in 5 per cent including tax relief under auto enrolment rules. Assuming your employer will match your contributions, that would mean a gross £7.50 on top of yours. Then comes tax relief, which on £6 is £1.50 – meaning if you save £6 a day into a pension, a grand total of £15 a day is actually going into it.

Over a year, that tots up to £2,190 from you, a £2,737.50 contribution from your employer, plus tax relief of £547.50.

All in, that’s £5,475. Most workplace pensions take a regular, monthly amount from your salary rather than an amount every day, but you can calculate what this equates to as a daily contribution by dividing it by the number of days in the month. Nearly £5,500 is a tidy annual sum to be saving, how do you then reach £1million?

Pension and investment provider AJ Bell crunched the numbers to show how over the decades you can expect investment returns and compound growth to turbo charge these savings. Typically, the more investment risk you take, the better the returns. So, AJ Bell looked at a low, medium and high-risk strategy.

With low-risk investments, which might only net you an average 4 per cent a year, it worked out that to hit £1million would take you 54 years.

A middle way investment strategy, which might return 6 per cent a year, would get you there in 42 years. An adventurous approach that might generate an annual growth rate of 10 per cent would cut the time frame to just 31 years.

Of course, to speed up that process you can increase your contributions. For example, saving £12 a day with a 10 per cent growth rate could allow you to get there in 24 years, though that assumes your employer continues to offer matching up to that level.

Getting ahead in the race for £1m

Pensions are designed to let you sit back and let your money grow, but being proactive can really pay off. So, we have rounded up expert tips to build your pension as rapidly as you can.

We have concentrated on ‘defined contribution’ work pensions, which take regular payments from both employers and employees and invest them to provide a pot of money at retirement. ­Savers bear the investment risk, rather than employers.

Traditional final salary or career average ‘defined benefit’ pensions, are more generous and provide a guaranteed income after retirement for the rest of your life.

Should you be fortunate enough to have one or more of these, you can also explore any additional voluntary contribution (AVC) offer by your scheme, or open a self-invested personal pension (Sipp) to improve your retirement savings further.

Start as soon as possible

Every pound you manage to put into a pension when you are young is incredibly valuable because it will snowball thanks to compound interest. It means you earn returns on your returns, which can build up dramatically.

‘Retirement may seem a long way away when you are in your 20s but the longer you contribute for, the better your chance of meeting your goals,’ says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.

‘Leaving it later means you have to hike your contributions significantly and that might prove a real challenge if you have other financial commitments.’

Use pay rises/bonuses

It’s well worth increasing your regular contributions in line with pay rises, and diverting some or all of your bonuses into lump sum payments into your pension where you can. Ms Morrissey says finding extra space in your budget to increase your pension contributions is hard, but it can have a huge impact on your final fund.

‘Making a decision to hike them as soon as you get a pay rise or new job can be less painful as you don’t get the chance to get used to having the extra money to spend.’

Check if your employer will put in more

If you are not already squeezing the maximum contributions possible out of your employer, you’re throwing away free money.

Extra top-ups are frequently available, particularly from large employers which are willing to make 4 per cent, 5 per cent or 6 per cent in matching contributions if you opt to save a higher proportion of your income.

If you can afford to do this, you will also receive more pension tax relief from the Government than you would have done otherwise.

It can be more financially advantageous to divert savings to max out these matched employer contributions, rather than stick spare money in a cash Isa or other account – although you will be locking it up until retirement rather than having readier access to your funds.

Charlene Young, senior pensions and savings expert at AJ Bell, says: ‘Around half of UK employers offer some form of contribution matching to workers, meaning if you pay in more than the ­minimum, they will too.’

Alec Collie, head of medical at Wesleyan, says: ‘Workplace pensions are one of the few times where paying a bit more can actually get you free money. In most schemes, your employer’s contribution is linked to what you put in.’

Monitor investment performance

Your defined contribution ­pension will be invested in funds to grow your savings for retirement. These invest in the stock market, government and company bonds and other assets.

Your employer’s ‘default’ pension fund is chosen to fit the average staff member, and the vast majority – around 90 to 95 per cent of workers – stick with it.

But work schemes also tend to offer a range of additional funds, which usually cost a bit more but cater to those who want more actively managed, adventurous, niche or ethical investments, or a combination of these.

More adventurous funds, particularly those with higher exposure to stock markets, have historically generated much higher returns over the long run.

Mr Collie says: ‘Many people stay in default or cautious investments without realising the effect this can have over decades. Even small differences in annual growth can add up over time.’

He points out that investing successfully can significantly increase the size of your retirement pot without you paying in any extra.

Default funds are meant to be ‘one size fits all’ for a workforce, and Ms Young says you should keep in mind they aren’t designed for you or your goals.

‘Younger people have decades to save, giving them more time to ride out the up and downs of putting more into the stock market in pursuit of higher returns than someone closing in on retirement.’

So, keep an eye on the performance of your pension fund and consider whether it is worth branching out. Both younger and older people might want to take more risk and tilt pension investments entirely or mostly towards stock market investments.

If you plan to keep your pension invested in old age rather than buy guaranteed income with an annuity, you might want to stick with a stocks strategy throughout your working life.

That is because you are likely to keep some of your pension pot invested for years after you ­retirement so have time to ride out any market falls.

Look at the fees you’re paying

When comparing fund fees, the key figure to check is the ‘ongoing charge’, which is the investing industry’s standard measure of fund running costs. The bigger it is, the costlier the fund is to run.

The charge cap on a workplace default fund is 0.75 per cent, and the fees on the others will probably be higher.

However, they will still generally be cheaper than if you buy the same fund yourself outside a pension, because workplace providers are able to negotiate bulk discounts. People considering whether to open a Sipp, because they have a wide and flexible range of funds, trusts and shares unlike work funds, should compare the charges.

Also, remember the potential loss of free employer top-ups if you haven’t already maxed out matched contributions to your work scheme.

Sign up to salary sacrifice

Contributions under popular salary sacrifice schemes are going to be capped at £2,000 each year, but not until April 2029.

The system allows workers to take a supposed pay cut, but that money goes into your pension instead (or you can use it towards other benefits like childcare). As salaries are lower both staff and their employers save on National Insurance.

Mr Collie adds that you can avoid tax traps in general by boosting your pension, especially if you are earning around £60,000 or £100,000.

That is because paying in more can reduce your taxable income, helping you keep more of what you earn while building your pension pot more quickly.

‘For example, earnings between £50,000 and £60,000 can trigger the loss of child benefit, while income over £100,000 faces an effective tax rate of around 62 per cent in the rest of the UK – and up to 67 per cent in Scotland – due to the loss of the personal allowance.’

Merge old pensions if it makes sense

You should find all the pensions you’ve saved into in previous jobs, and consider merging them – but check charges and any valuable guarantees first.

Ms Morrissey says if you haven’t kept track of all your pensions from previous employers you could be missing out on tens of thousands of pounds.

‘That tiny pension you had early on in your career shouldn’t be disregarded as time in the investment market means it could have grown significantly.’

The Government has a free pension tracing tool at: gov.uk/find-pension-contact-details

Perseverance will pay off

Even small contributions really add up – so long as you stick at it. If you cut your pension saving at some point during your working life or stop saving altogether, get back to it as soon as you can. It’s rarely too late to get started.

If you’re self-employed or not in work and so don’t have access to a workplace pension, you can open your own and still benefit from pension tax relief.

What have you done to boost your pension? Let us know at money@mailonsunday.co.uk